Starbucks’ CEO hailed the impact of the brand’s increased investment in marketing, as the coffee giant looks to dial up its distinctiveness.
In January, the chain said it was “close to doubling” its marketing spend as a percentage of revenue, as it sought to “get back” to what sets it apart from competitors. CEO Brian Niccol, who took over the role in September, has previously acknowledged the business has “underlying issues” to address.
Under previous leaders, Starbucks has been the subject of criticism for having lost focus on what appeals to customers. This is something Niccol has sought to address, introducing the new ‘Back to Starbucks’ strategy last autumn.
Starbucks’ CEO hailed the impact of the brand’s increased investment in marketing, as the coffee giant looks to dial up its distinctiveness.
In January, the chain said it was “close to doubling” its marketing spend as a percentage of revenue, as it sought to “get back” to what sets it apart from competitors. CEO Brian Niccol, who took over the role in September, has previously acknowledged the business has “underlying issues” to address.
Under previous leaders, Starbucks has been the subject of criticism for having lost focus on what appeals to customers. This is something Niccol has sought to address, introducing the new ‘Back to Starbucks’ strategy last autumn.
Speaking to investors yesterday (29 July), he emphasised the role Starbucks being the “best” version of itself has played in driving success against a competitive backdrop.
I do think our marketing is playing a positive effect on the business.
Brian Niccol, Starbucks
“The best way I know to compete is to be the best form of yourself,” Niccol said. “That best form of Starbucks is, without a doubt, world-class customer service, driven by the connection between our barista and our customer, with the craft of our drinks in a special third place.”
While the coffee chain’s leadership was upbeat about the strategy, sales were still in decline during the third quarter. Global comparable store sales fell by 2% year-on-year in the three months to 29 June.
Despite reporting falling sales, Starbucks claimed it is seeing an “improving” trend in terms of comparable sales. Niccol acknowledged the role marketing had played in this.
“I do think our marketing is playing a positive effect on the business,” he told investors.
A premium business
Customers are “responding” to the brand’s “much better” marketing activity, the Starbucks CEO claimed, citing increasing numbers of non-discounted Rewards customer transactions as an example.
During its third quarter, Starbucks saw the number or volume of transactions it made decline, however, the average amount spent increased slightly. A focus for the business has been stepping away from deep-cutting discounting activity. In the US, the chain reduced its discounting activity by a third, explained chief financial officer Catherine R Smith.
Value is something that is incredibly important for the brand, said Niccol, who claimed Starbucks has seen success in this area recently.
“One of the most important things you do with a consumer-facing company is making sure that the brand is perceived to be valuable,” he said. “One of the things I was really delighted to see is we’ve made tremendous progress on that value front.”
However, value will be delivered in lots of different ways, with the business taking care to continue to emphasise its premium positioning.
“We are a premium brand that gives people access to premium experiences,” said Niccol.
Having said that, Starbucks is thinking carefully about delivering value via new product innovation and the wider pricing strategy. Niccol leant on the language of the 4Ps when describing about how the brand intends to deliver.
“We want the innovation to be relevant for the daypart that we’re going after and the occasion that we’re going after,” he said.
“So, in some cases, that may mean a smaller size. In some cases, it may mean we think differently about where that price falls within our menu architecture. So obviously, it’s important that we all remember the old marketing class we took, right? I can’t remember if it’s 4Ps or 5Ps, but one of the Ps is definitely price.”